Unprecedented: Oil tankers moored offshore at the height of the Covid 19 pandemic were a bad sight for the industry that may never fully recover and breach its pre-lockdown highs | Photo: Reddit

The 2020 Fossil Fuel news round-up

A year that left the world wondering “blip or a new normal?”

Oil industry rocked by negative prices

Crude oil prices dipped to below zero in April (-$37.63 a barrel for future contracts, to be exact) as countries went into complete shutdown and demand for oil evaporated. Hordes of tankers were moored offshore as ports were shuttered and customers had no use for the shipment. The tussle between Saudi Arabia and Russia to flood the market with cheap oil had already worsened the situation and together they exposed how acutely vulnerable oil is to price wars and economic ups and downs. While Brent Crude is back up now to trading at around $50 a barrel, analysts fear that with countries determined to adopt climate-conscious policies and growing competition from ever cheaper solar and wind power, demand for the commodity may never again breach the highs of 2019. 

Gas leaks and oil spills further damage local ecosystems

A gas leak that happened in Assam, India, on May 27 caused a sudden explosive blowout of natural gas from well number 5 in the Baghjan oilfields, which was being explored by Oil India Ltd. (OIL). By June 9 the well was caught in an out of control fire after crude oil flooded out, and subsequent rains and wind conditions contaminated the nearby Dibru-Saikhowa National park. Dead fish washed up in the rivers, as did the carcass of a Gangetic Dolphin. Three OIL employees also tragically lost their lives. Strangely, OIL had been exploring the oilfields without mandatory environmental clearances. It had also skipped the public hearings that would allow for local residents to voice their concerns with the operation.

In Russia, melting permafrost in the Arctic caused a storage tank in its far north to sink and collapse on May 29, spilling out 21,000 tonnes of diesel into Lake Pyasino. Rapid cleanup operations were launched to prevent the oil from flowing into the Arctic ocean, but it had already contaminated local water systems. Mauritius, on the other hand, reported one of its worst environmental disasters when on July 25 a Japan-registered cargo ship that had run aground on its pristine coral reefs discharged around 1,000 tonnes of fuel oil of unusual composition. Several marine animals died within a few miles of the accident and even though the cleanup is on track to be completed by January, the contaminants — including carcinogens — may have accumulated in the country’s coastlines.   

IFC mandates coal exit, China drops “clean coal” from green bonds list 

The World Bank’s financial arm, the International Financial Corporation (IFC), issued a new set of rules under which commercial banks must exit their Asian and African coal investments by 2030. IFC’s policies carry enormous influence and the new directive could soon throttle many new coal projects in the works, such as in Bangladesh, Laos and Vietnam, that are financed by China, Japan and South Korea. 

Progress was reported from China as well as it dropped “clean coal” from its list of projects eligible for green financing. Cleaner burning coal made its list in 2015 but drew criticism from the international climate community for attracting billions of yuans from Chinese banks, as campaigners argued that green financing should exclusively support renewables and zero carbon alternatives. China is the world’s largest coal consumer and its government was lobbied hard to allow for hundreds of new coal plants to be built under its 14th five-year plan, but the country has since also announced that it will phase out coal power “around 2050”. 

Coal’s fortunes worsen in India despite every effort 

India’s public financing for coal dropped by a whopping 126% for 2019 over 2018, clearly indicating that investors are seeing little value in the fuel going forward. The Centre also put in a lot of effort to garner interest in the auction of 41 coal blocks, but the response was lukewarm at best as 15 of the 38 blocks eventually auctioned received no bids at all. This was despite the government removing all captive end-use restrictions on coal mining and relaxing the entry criteria to allow bids from entities with no prior experience or qualification to mine coal. So while Coal India’s annual output target has been revised to one billion tonnes by 2024, demand for coal seems to be going south. 

The pandemic-induced lockdown also saw coal plant PLFs across the country plummet to a lowly average of 45%. Meanwhile, the issue of coal-fired stranded assets remains to be resolved and some DISCOMS reportedly want to exit their coal power PPAs for cheaper alternatives. 

Singapore-Qatar LNG deal to detail emissions

The LNG deal signed between Qatar and Singaporeset an industry first by agreeing to detail the emissions from each cargo load of the fuel delivered under its 10-year term. The LNG will be delivered by Qatar’s Pavilion Energy, which will detail the shipments’ emissions all the way from the gas well to the import terminal, even though the deal does not obligate its parties to offset their emissions. Nevertheless, the trend may be replicated and emissions from LNG will need to be monitored closely as natural gas assumes global importance as a replacement for coal, despite predictions that, similar to oil, its consumption figures may never outpace that of 2019.

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